Telstra furious about freebies to Optus, TPG

Guaranteeing spectrum to certain companies would amount to ‘unprecedented and extremely aggressive regulatory intervention’, Telstra stated.

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Telstra Corporation Ltd (ASX: TLS) has reacted angrily to a suggestion from the federal government that Optus and TPG Telecom Ltd (ASX: TPG) be set aside spectrum while it misses out.

Spectrum is a range of wireless frequency that can be used for many technologies, including broadcast radio and mobile phone networks. 

Communications minister Paul Fletcher revealed the plan in a letter he wrote to the Australian Competition and Consumer Commission (ACCC) late last year, as first reported by iTnews.

“I believe there are grounds to guarantee 2×5 MHz of spectrum for Optus and TPG Telecom in the 900 MHz band,” the letter reads.

The spectrum in question will be auctioned to allow telecommunications companies to keep 3G mobile services running. Regional and rural areas in Australia rely on this for complete cellular phone coverage.

Fletcher’s proposal did not guarantee any spectrum for Telstra, but did ask for ACCC’s opinion on whether that’s okay.

Telstra responded strongly to the plan, saying it was firmly against any scheme to guarantee spectrum for its competitors.

“This would be an unprecedented and extremely aggressive regulatory intervention, fundamentally distorting the market and utterly inconsistent with the proposition market forces should determine the highest-value use for spectrum,” the company stated in a submission to the ACCC.

TPG and Optus say the plan merely evens the playing field

Understandably, TPG and Optus loved the minister’s plan. They see it as levelling the playing field to counter Telstra’s historical advantage.

Singapore Telecommunications Limited-owned Optus, through its submission, stated the current holdings of low-band spectrum were “not balanced”.

“There is a risk that absent allocation limits, low-band spectrum could be concentrated in the hands of a single player. Such an outcome would not be good for competition or the interests of Australian consumers and businesses.”

TPG has even suggested it should receive the guaranteed spectrum at the “starting price” of the auction.

“Prior to the merger that formed TPG (in May 2020), the distribution of sub-1 GHz spectrum was skewed heavily in favour of Telstra across most of Australia,” the telco stated in its submission.

“The concentration in sub-1 GHz holdings has been a key factor behind Telstra’s enduring dominance of the mobile services market.”

If TPG and Optus are provided a discount to the free-market auction price, Telstra has argued it should also receive a proportional cut to any of its bids.

Telstra shares were down 0.8% at the time of writing on Monday afternoon. TPG had also fallen, by 0.28%.

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Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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